Fonterra guaranteed price debuts at $7/kg ms

Fonterra has confirmed a guaranteed milk price of $7 per kg of milk solids (ms) for its 2013-14 season pilot scheme, which it says has already attracted strong interest from farmers.

The guaranteed milk-price scheme meant farmers could choose to lock in a milk price announced at the beginning of a season for up to 75% of their milk supply.

The confirmation followed the dairy co-operative's announcement of an opening milk-price forecast for the season of $7/kg ms.

Fonterra was looking for about 200 farms to take part, ideally with a broad base of farmers at different stages of their farming operations, with varying herd sizes and located across the country.

Those interested in taking part in the pilot need to apply by June 21.

The scheme would allow farmers who required greater certainty to better plan for the full farming year, knowing exactly how much money they would receive for a set portion of their milk supply, Fonterra's director of commodity risk and trading, Bruce Turner, said.

It provided the co-operative with strong certainty, as it allowed it to lock in contracts with customers at a set price ''so that we can make sure we have the right margins so there is no impact or risk if there is a fall in prices'', he said.

In its latest Agri Focus, ANZ was predicting a milk-price forecast of ''somewhere around'' the $6.80kg ms mark, with positive upside. Taking into account present international spot prices and currency, a much higher milk price of $7 to $7.50kg ms could be achieved.

However, the bank built in an assumption that average international prices would weaken by 15% over the course of the season.

Beyond next season, prices were expected to return to the middle of recent ranges, averaging $US3500 ($NZ4448) per tonne in 2014-15.

Combined with the New Zealand dollar slowly depreciating back to fair value levels, that gave a milk-price forecastof around the low to mid-$6 per kg ms mark, ANZ economists said.

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